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Spectrum matters top-of-mind for telco CEOs

By Karamjit Singh September 17, 2014

Refarming to be done across the board, says MCMC

Current thinking not about creating new players

EVERY telco chief executive officer (CEO) in the room, and there were six of them plus one chief operating officer, suddenly sat upright and leaned forward, ears straining and eyes carefully scrutinising every involuntary tick on Mohamed Sharil Tarmizi’s face as the chairman of the Malaysian Communications and Multimedia Commission (MCMC) spoke about the one topic that can stop telco CEOs in their tracks: Spectrum.

Sharil (pic) was aware of the sudden spike in interest too. “I have to be very careful with what I say here ... look at all the mobile CEOs,” he said.

While it was a comprehensive briefing, covering all four sectors that MCMC is responsible for – telcos, both fixed and mobile, postal and courier, cybercrimes and digital signatures – it was his response to a question on spectrum that riveted the telco CEOs.

But Sharil, skilled and adept at measuring his words in the manner all regulators are, gave nothing away that hinted at how the Malaysian Government will decide on the all-important spectrum refarming exercise that is expected to happen in 2015.

No firm date has been set as the existing spectrum lease of the three top mobile telcos Celcom, DiGi and Maxis comes to an end.

He reminded everyone that in a similar briefing he gave in December 2012, he had pointed out that the government had adopted a ‘spectrum rebalancing’ approach in deciding who to give the Long-Term Evolution (LTE) 2.6GHz spectrum to.

“It [the spectrum picture] is not yet fully rebalanced as it is not possible to be as equal, but we try to be as equitable as possible,” he said. This is what led to eight players getting smaller pieces of the 2.6GHz spectrum back in 2012 with the one new player, Puncak Semangat Sdn Bhe getting the largest portion with 40MHz. [Correction: An earlier version said eight new players got in on the 2.6GHz spectrum. In fact, only one player, Puncak Semangat, was new.]

However, lest the gathered telco CEOs started worrying that their expired spectrum was going to be divvied up between new players, Sharil offered this comforting caveat: “We will not be looking at new spectrum so much for creating new players … at least that is the current thinking.”

Yet, in the next sentence, and typical of regulators, he leaves the options wide open, saying: “If we go for beauty contest, we will not stop eligible parties coming in to bid. That is part of the process.”

But he made clear that no decision had been taken on which approach or method to take. The appropriate consultations will be taken, he reassured, with various options available to them as laid out under the Spectrum Regulations – beauty contest, auction, allocations or a combination of the three.

If there was any hint to the thinking that will influence the refarming exercise, it was this: That one of primary objectives will be the introduction of new services and better quality services to consumers.

“And to rationalise some of the investments already made,” Sharil said.

What exactly this rationalisation of investments means is not yet clear. Nor is it clear when the refarming will be carried out, as Sharil said that the MCMC “will be looking at refarming across the board,” especially with 1800MHz, then 900MHz and finally 700MHz becoming available when the switchover from analogue to digital TV is completed.

The 700MHz spectrum will be the last one to be freed up and could come in mid-2016, industry players speculate. The operator of digital TV, Puncak Harapan, expects to fully roll out the service by April 2016.

For the likes of U Mobile and its CEO Wong (pic), the refarming can’t come soon enough as he has complained to the MCMC over the scarce spectrum his company has at 15MHz, which is not enough.

Shahril said that the spectrum the top three mobile telcos have is partly a result of them being given spectrum back in the mid-1990s, coupled with various acquisitions that have happened over the past 15 years. Thus it is a combination of historical plus market force factors.

U Mobile announced last week an ambitious US$468.8 million (RM1.5 billion) network expansion plan involving 1,000 3G and 1,000 4G (Fourth Generation) sites. With plans for a listing as well, it clearly wants to wean itself off from relying on the Maxis network it is leasing capacity from.

But Wong, like every other telco CEO in the country, will have to wait for the refarming exercise, while everybody else is still waiting for the hard date for this to be set.